A Lesson from Recent U.S. History: We Need a Program for Good Jobs

In the business press the question of the day is whether we are entering a recession. But even if we do not slip into recession, there is an old problem that we ought to address, and that is the shortage of good jobs. Only one of the presidential candidates, John Edwards, seems to understand the issue. Many of us don't think much about it, and that is surprising because for three decades average wage levels have gone nowhere.

I discovered the importance of the deficit of good jobs as I researched my history of poverty policy in postwar America, Why America Lost the War on Poverty. I concluded that War-on-Poverty programs failed because they did not create many jobs.  Even during the boom of the 60s there was a shortage of good jobs and in the 70s the situation worsened.  Women, baby boomers, and immigrants flooded the labor force and global realities worsened for employees. Poverty rates stopped falling and the pay of average Americans stagnated. The elimination of poverty and near poverty in the U.S. requires many things; I offered seventeen suggestions in my book, but the top two involved the direct creation of decent jobs.

The facts about pay are familiar. The after-inflation hourly wage of the average worker in December of 2006 was 7% below what it had been in 1972. Poverty rates have never fallen below the 11.1% level they reached in 1973. Full-time year-round female workers have gained, although they still earn less than men. Annual pay for men who work full-time year-round was less in 2006 than in 1973.

What explains the wage depression? Two explanations are common: increased global competition and a shortage of skills and education. There is not much to the school-and-skill argument (does it explain Wal-Mart's heavy reliance on Chinese workers?), and although globalization was influential, two other factors were more potent: the erosion of equalizing institutions and the glut of workers. We know a lot about the former: the declining influence of unions, a low minimum wage, and so on. We know less about the worker surplus. In a nutshell, since the early 70s, there have been more potential workers than jobs. The result: weak bargaining power for employees. 

This idea of a permanent labor surplus challenges dogmas that have been with us for a long time. President Reagan claimed that there were plenty of jobs even while he supported policies raising unemployment. Pundits and politicians think that we are usually at full employment. Conservatives don't believe in unemployment; you can always find a job if you will just work for less. We know that many people just don't want to work, right? That is what my doctor claimed but he received one hundred applications for one low-wage position. There are specific and seasonal labor shortages (as in nursing and farm work) but few general ones. Since World War II, we have had robust demand for labor three times: in the early 50s (Korea), the late 60s (Vietnam), and the late 90s (a miracle).

What support is there for my view of the labor market?  There are stories. For every tale of a worker who does not want to work, there is a counter-narrative. This fall, 6,000 people lined up for 300 jobs at Wal-Mart's new Supercenter in Cleveland. That was for work with a company that pays poorly, is stingy with benefits, and discriminates against women.

Aside from stories, new perspectives suggest that unemployment is much higher than the 5% government figure for December. Scholars have long questioned the Bureau of Labor Statistics criteria (you are unemployed only if you have looked for work in the past four weeks) and thirty years ago the BLS inaugurated alternative measures that included some who wanted work but had not recently looked and part-timers who wanted full-time work. Adding those categories the Bureau generated an 8.8% alternative unemployment rate for December. Going beyond that, the National Jobs for All Coalition adds people who want to work but are inhibited from looking by such things as child-care responsibilities and fear of discrimination. The coalition came up with an unemployment rate of 10.8% for December.

I'd go even farther. There are downsized workers who do not find work and slip out of the statistics and independent contractors who are really unemployed but too proud to admit it.  There are scientists and engineers who are replaced by low-wage immigrants brought here under government protection as a present to struggling corporations like Microsoft. There are millions of Americans over 65 who want to work but have not searched recently and millions on federal disability who would be looking for work if there were no disability program or working if jobs were more attractive. And finally, to return to something we are all familiar with, Americans compete in a world-wide labor force that includes workers in China, India, Mexico, and other nations with colossal unemployment.

Our official unemployment rate tells us about 1/3 of what we need to know about the potential labor force. My alternative, although less precise, tells us more, and it tells us why wage growth has been lousy for thirty years: too many workers, too few jobs.

What is the solution?  First, politicians and pundits need to get with reality. Most won't because solutions are costly, disruptive of old beliefs, and threatening to campaign contributors. But one can hope. Second, Federal Reserve officials must take unemployment seriously. Recession cannot be the Fed's automatic answer to inflation; the chair should announce that other agents of government have to help fight inflation by focusing directly on health care, energy, college tuition, and the most inflationary area of all, CEO pay. Third, in part because the Fed rarely allows the economy to grow long enough for sustained high labor demand, others in government must create millions of good jobs. We should roll back tax cuts for the rich and expand public investment in the long delayed repair of infrastructure, the teaching and caring professions, an environmental corps, and a dozen other socially beneficial areas.

Will it happen?  One can always hope that facts and common sense intervene and dogma and campaign dollars recede. A successful jobs program would mean more people with jobs that paid well and fewer people working. The aim of the program is not that every single adult is working, but that people have enough income to support a family. Ultimately our common goal should be to have more people with savings or with partners earning enough so that individuals may step out of the labor force to care for children or a sick relative, engage in political action, or read poetry.